USDA Land Loans in Texas: A Complete Guide

The United States Department of Agriculture (USDA) offers several loan programs to help Americans in rural areas purchase or develop land in Texas These USDA land loans provide financing to buy vacant land to build a home on or develop sites for affordable housing

In this comprehensive guide we will cover everything you need to know about USDA land and lot loans available to Texas residents including

Rural Housing Site Loans

The Rural Housing Site Loan program offers two types of low-interest loans to purchase and develop sites for housing in rural areas:

Section 523 Loans – Designed to acquire and develop sites solely for self-help housing constructed by nonprofit organizations. Up to a 3% interest rate and 5-year loan term.
Section 524 Loans – Made to nonprofits to buy land and develop sites for low to moderate income families. Below market interest rate fixed at closing and 5-year repayment period.

Rural Housing Site Loans can be used to purchase the land, pay for infrastructure like streets and utilities, or make other necessary improvements. The sites can then be sold to families eligible for USDA Single Family Housing loans.

Eligible applicants include private nonprofit organizations, tribes, and public entities. The site must be in an eligible rural area.

USDA Single Family Housing Loans

USDA’s Single Family Housing programs offer several loans that can be used in conjunction with a Rural Housing Site Loan to purchase the developed site and construct a home

Section 502 Direct Loans – 1% interest rate direct mortgage loans from USDA for low to very-low income borrowers unable to qualify for traditional financing.
Section 504 Loans – Provide up to $40,000 to very-low income homeowners at a 1% rate to rehabilitate or improve their properties.
Section 502 Loan Guarantees – USDA guarantees loans from private lenders to help low to moderate income families buy homes in rural towns or communities.

These programs allow borrowers to purchase homes on the sites acquired and developed through the Rural Housing Site Loan program. Eligible households must meet income and credit requirements.

Farm Service Agency (FSA) Land Loans

The USDA Farm Service Agency (FSA) provides loans specifically for purchasing or improving farm properties. There are two main programs:

Farm Ownership Loans – Help farmers and ranchers purchase or enlarge a farm, construct new farm buildings, or improve structures. Long repayment terms of 10-40 years and low fixed interest rates. Can finance the purchase of land, construction, and initial operating expenses.
Farm Operating Loans – Provide financing to purchase livestock, farm equipment, feed, seed, fuel, farm chemicals, insurance, and other costs. More flexible eligibility requirements than ownership loans. Repayment periods of 1-7 years.

To qualify for FSA loans, the property must be used for agricultural purposes. Applicants must be unable to obtain commercial credit and have sufficient education, training, or experience in managing and operating a farm or ranch.

Natural Resources Conservation Service (NRCS) Conservation Loans

NRCS offers low-interest loans to implement conservation practices on land being used for agriculture. These include:

Conservation Loans – Help cover up to 100% of costs for installing USDA approved conservation measures like irrigation systems, drainage tiles, terraces, or cover crops.
Watershed Loans – Larger loans made to local organizations like watershed groups or conservation districts to install watershed protection and flood prevention projects.

NRCS loans can be used hand-in-hand with FSA farm loans to purchase agricultural land in Texas and make conservation improvements.

Key Tips for USDA Land Loans

When applying for USDA land financing in Texas, keep these tips in mind:

Check eligibility requirements like income limits, credit score, property location, and type of use for the specific programs.
Target loan amounts within the maximum limits and terms for the programs. Some have caps on the loan amount.
Look into down payment assistance programs like grants or subsidized loans to cover land down payments and closing costs.
Work with USDA approved lenders familiar with rural housing and farm loan requirements.
Seek help from USDA loan specialists to choose the right loan products and improve your chances of approval.

With multiple loan offerings for purchasing vacant land, making site improvements, or buying farm properties, USDA has solutions to help Texans in small towns and rural communities obtain the land financing they need. Analyze the options to pick the best USDA land loans for your situation.

USDA Mortgages Compared to Other Mortgages

USDA mortgages usually offer the lowest rates on the market. There’s no down payment required, making them an ideal option for those who lack savings. However, rates on USDA loans will depend on your financial situation. To get the best rate, you will need ahigh credit score coupled with a sizeable down payment. The more financially strong you appear to your lender, the lower your rate will be. Also, rates may vary by lender, so don’t be shy about shopping around. While many lenders don’t advertise USDA loans, most offer them.

Pros and Cons of a USDA Loan | All You Need to Know About USDA Home Loans EXPLAINED

FAQ

How to get a USDA loan for land in Texas?

In order to be approved for a USDA loan, you and the property must qualify. The property must be located in a rural area. This means the area must have a population of less than 20,000. In order to meet the income qualifications, you must make less than 15% above the average income for the area.

What is the income limit for an USDA loan in Texas?

Eligibility Requirements – Texas The average household income limits for a USDA home loan in Texas is $110,650. The household limits also vary according to how many occupants in the home. With 5 or more occupants the limit can be as high as $177,350.

What credit score do you need for a USDA loan in Texas?

Automatic GUS approval requires you to have a credit score of 640 or higher with no outstanding federal judgments or significant delinquencies. Even if you don’t have a 640 credit score, it’s still possible to apply and be approved for a USDA loan.

How much are closing costs in Texas with a USDA loan?

Generally speaking, for a new home purchase in Texas, the buyer can expect to pay around 4.5% (of the purchase price) for closing costs and prepaid escrow requirements. Escrow requirements include prepaid taxes and home insurance.

How many USDA backed home loans are there in Texas?

There are 42,533 USDA backed residential loans in Texas with an average loan balance of $105,243. Over 86% of the loans went to help first time home buyers. Borrowers were an average age of 38 years old. The typical appraised home value was around $107,390. On average the rural home size purchased with this loan was approximately 1,611 square feet.

Are rural areas eligible for USDA loans?

Rural Areas: Most areas outside major cities and their immediate suburbs are considered rural and eligible for USDA loans. These areas often have lower population densities and are not part of larger metropolitan statistical areas (MSAs). As defined by the USDA, rural areas have a population of less than 50,000 people.

How do I contact bank of Texas for a loan or refinance?

For new loan or refinance inquiries, call 888-664-2135. We’re here to help. Bank of Texas’s USDA Rural Development Loan feature flexible terms, competitive rates and more. Buy, build, or refinance in eligible areas with confidence.